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The Innovation Process
Activity 5.3 E

Test your business model

This activity will help you assess the feasibility of the business and revenue model you have in place and decide whether you need to explore alternatives.

Business Model Review

Understanding and developing a viable business model, and particularly a revenue model, is critical for the sustainability of your innovation. Before you proceed you will need to test aspects of the business model you developed in the Invention stage.

It is estimated that in many crises the largest volume of funds that flow to the people affected is from their own family and friends in remittances. The second largest volume of funding comes through the traditional humanitarian donors. If the success of your business model is reliant on the humanitarian donor system, some key questions include:

  • Does the humanitarian system recognise this problem?
  • Have they quantified the impact of the problem?
  • Do they currently fund solutions to this problem?
  • If there is funding for solutions to this problem, is it from funding streams that you might be able to access?

The more questions in this list that you can answer yes to, the more likely you will be able to develop a revenue stream through the existing humanitarian donors. If you find that the answer is no to any of the four questions above, you will need to find alternative business and revenue models to ensure the sustainability of your innovation.

During the Pilot stage key elements of your proposed business model should be tested, so you can get some indication of the feasibility of your revenue model. This might be revenue for your own organisation to continue to run the innovation if it is successful, or it might be revenue that you are seeking from other users and/or funders of the innovation that will help maintain its sustainability, and even the sustainability of your organisation.

If you are running the pilot with a partner organisation, it is worth testing whether there is a particular part of your value proposition they find useful and may be willing to pay for. If you aren’t, it is worth researching the potential ‘buyers’ of your innovation. In many cases this may be humanitarian agencies, but it may be other actors. It is critical that you identify who these potential buyers are, whether they would pay for your innovation, and if they would, how much. You will then need to understand how purchasing decisions are made.

There may also be other areas of your business model that you need to test in your pilot, such as key activities, replicability, delivery models etc. Make sure that you are testing the most important ones, and that you’re getting regular feedback in order to learn and iterate. There may well be new challenges, opportunities, assumptions or ideas that emerge during that the pilot that impact your business model; ensure that you are paying attention to these, and that you are able to design tests around them.